My Economics Guide, What is Bollinger Bands? With Bollinger Bands How to Use? will answer the questions and will enlighten new investors who want to trade on the stock exchange. In our previous article, we explained the ATR indicator which is also an important indicator .
What is Bollinger Bands?
Bollinger Bands is an indicator created by John Bollinger in 1980. This indicator is one of the most used indicators in stock exchanges. In particular, the Bollinger Bands, which clearly show the volatility of the investment instrument examined, are more successful in markets with higher volatility. Let’s take a look at what clues this indicator can give us on the stock markets.
It shows volatility as we say in defining it.
It can give tips at the beginning of the trend.
It can point to the direction of the trend.
It can show peak and bottom regions in price movements.
It may indicate jams in prices.
Bollinger Bands are generated using three curves. The curve in the center shows the 20-day moving average. The other curves above and below are obtained by moving the 20-day moving average up and down by 2 standard deviations. However, these values can be changed by the investor when using Bollinger Tapes. This depends on the investor’s knowledge and experience.
What is Bollinger Bands?
How to Use Bollinger Bands
The narrowing of the Bollinger Bands explains that prices are squeezed and supply and demand meet each other. After this indecision and trend trend, a sharp jump may occur in prices. Usually, the jump will occur in the direction of the trend to occur.
If prices break the upper band, this may indicate a bullish trend and prices are expected to continue to increase. The break in the lower band may indicate that the trend is a downward trend and that the decline in prices will continue.
If prices intersect the middle band upwards, prices will rise with the upward trend; If prices cut the middle band downwards, the downward trend may be expected to decrease.
When using the Bollinger Bands , prices are re-entered into the belt as a result of very severe breakage of the upper band, ie a slight decrease; With a very severe break of the lower band, prices can be expected to enter the band again, ie a slight price increase.
It should be noted that the expected and predicted situations with Bollinger Bands are probabilities. The aforementioned situations are not certain signs of where prices will go. In addition, it will be healthier to use Bollinger Bands with other indicators and to strengthen the estimates.
This article is definitely not an investment advice. It cannot be used as investment advice. The aforementioned statements are possibilities. In addition, Economy Guide does not provide investment consultancy services.